When does the IRS start accepting tax returns…and what’s this free new Direct File program we keep hearing about? For all of the details you need to know as tax season continues, read on.
The IRS Is Already Accepting Tax Returns For 2024
ICYMI, tax season is officially here. If you’ve been prepping to file, you may be wondering, “When does the IRS start accepting tax returns?” On January 29, the Internal Revenue Service (IRS) began taking in and processing returns…which means you can file anytime now. Just be sure to meet Uncle Sam’s deadline. It’s April 15 for most filers, unless you’re a resident of Maine or Massachusetts. In this case, you get until April 17.
You may have also heard rumblings of a new program being offered by the IRS called “Direct File.” It’s an initiative being piloted by the federal government that provides eligible taxpayers with a way to file their 2023 federal tax returns online, for free, directly with the IRS. Here’s a look at all the latest detials on Direct File–from who should use it to when it will be available.
What’s Really Happening With The New Free Tax Prep From The IRS
You’ve pulled all your important tax documents together, and now you know the IRS is began accepting tax returns on Jan. 29th. Now, you’re ready to file and probably looking for the cheapest, easiest way to do so.
One of the options available to some Americans this year is Direct File, a free, online tax-prep pilot program from the IRS. It’s similar to some of the brand names you’re probably familiar with, like TurboTax and H&R Block. Direct File is a result of the Inflation Reduction Act of 2022, which directed the IRS to take steps toward the creation of a free program that could let taxpayers electronically file directly with the agency.
According to the IRS, the pilot is being rolled out in phases. This year, Direct File will only be available to individuals who lived in the following states in 2023:
- New Hampshire
- New York
- South Dakota
- Washington state
When does the IRS start accepting tax returns via Direct File? It depends. The pilot is also limited in the number of people it’s accepting, which means that even if you live in one of the above states, you might have to wait to use Direct File. If you received an invitation from the IRS to participate in the pilot, it’s full speed ahead. If you live in one of the states participating and haven’t gotten an invitation, you can sign up to receive updates on the Direct File website. Doing so will ensure the IRS contacts you when the program opens to new participants in eligible states.
Who Is Direct File For?
According to the IRS, the Direct File pilot is for those with “relatively simple” tax needs. If you have a more complex tax situation, then Direct File isn’t for you. For example, taxpayers falling into the following categories cannot use Direct File:
- Those who have other types of income (such as business income, or income via the gig economy)
- Those who itemize deductions
- Those who claim other credits, like the Child and Dependent Care Credit, Saver’s Credit, or the Premium Tax Credit
Again, you also need to be in a state that’s currently participating in the pilot to use Direct File. For more details on eligibility, click here.
I’m Eligible…Now What?
Once you’ve determined you’re eligible for Direct File, you will be able to file your 2023 federal tax return at no cost, in English or Spanish via your smartphone, laptop, tablet, or desktop computer. The pilot also promises to offer step-by-step guidance as you add your tax information, as well as connect you with real-time, online support from IRS customer service reps if you need some extra assistance.
According to the IRS, Direct File returns are processed the same way as all electronically filed returns. In other words, those who use Direct File won’t be skipping the line when it comes to having their returns processed.
What You Need To Try It
To participate in the Direct File pilot, you will need the following:
- A Social Security number or Individual Taxpayer Identification Number for yourself and any spouse or dependents you claim
- If applicable, an Adoption Taxpayer Identification Number for any dependents you claim
- Your current driver’s license, state ID, passport, or passport card
You will also need to verify your identity and securely sign in. This is done via something called an ID.me account. To obtain an ID.me account, you will need to prove your identity using a state or federally-issued ID (for example, your driver’s license or passport.) You will also be required to take a video of your face. Note, that the videos used by ID.me are used to match the picture on your ID and are not stored. If you’re unable to–or don’t want to–take a video of your face, there’s always the option to have a video call with an ID.me representative who will confirm you are who you say you are.
How Much Can You Save?
Not only can tax prep be incredibly time-consuming, it can also be expensive. According to the National Association of Tax Professionals, the average cost for filing an individual return was $248 in 2023. As far as time goes, the IRS estimates it takes roughly 9 hours for an individual taxpayer with basic tax needs to file.
One of the biggest advantages of Direct File is that it’s free. As far as how much time it will save you, that’s up for debate. “The new system is obviously free and allows taxpayers to file directly with IRS,” says Karla Dennis of Karla Dennis And Associates, Inc. “It will read information directly from taxpayers’ IRS accounts and hopefully advise taxpayers on what is right or wrong with their taxes. Keep in mind that the effectiveness of such programs can vary depending on individual use cases and requirements.”
Is Direct File The Future Of Tax Prep?
According to the IRS, the purpose of the Direct File pilot is to make sure the software is easy to use and to get all the kinks out before they take steps to offer the program to the general public. “Direct File, if pursued further after the pilot, would be another option eligible taxpayers have to help them prepare their tax returns in addition to existing options such as the use of a tax professional, tax software, Free File, or another option,” IRS Commissioner Danny Werfel recently noted. “It’s consistent with the IRS mission to make sure taxpayers have available options that work the best for their personal situation.”
If Direct File rolls out as expected and is eventually offered nationwide, what becomes of other electronic tax prep services? Is DirectFile the future of tax prep? Tania Mercado of Intuit, which owns the electronic tax filing service TurboTax, is both critical and skeptical of the program. “Direct File is not free tax preparation, but rather a thinly veiled scheme where billions of taxpayer dollars will be unnecessarily used to pay for something already completely free of charge today – free to the taxpayer and actually free for the government,” shares Mercado.
She also believes filing with the IRS could shortchange taxpayers. “Filing taxes without someone advocating for your highest refund could be a recipe for overpaying the Internal Revenue Service and Departments of Revenue, organizations with titles that clearly state their focus, generating revenue for the government,” Mercado adds.
BTW, this is just the latest chapter in the war of words between Intuit and the Federal government, which last month, issued an opinion finding that stated Intuit (and specifically, TurboTax) engaged in deceptive practices. Intuit clapped back and is appealing the decision.
The Bottom Line
Time will tell whether Direct File is a success or not. In the meantime, the most important thing you can do is file, ASAP, since the IRS is already accepting tax returns. And when it comes to doing so, you’ve got options…some free, others that will cost you. What’s right for you ultimately depends on your tax situation.